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of <h1>Tribunal upholds CIT(A) decision on Section 115JB addition, citing Bombay HC and SC precedents. Appeal dismissed.</h1> <h3>Income Tax Officer –3 (1) (2), Mumbai Versus M/s Bhagwan Industries Ltd. And Vice-Versa</h3> Income Tax Officer –3 (1) (2), Mumbai Versus M/s Bhagwan Industries Ltd. And Vice-Versa - TMI Issues:1. Deletion of addition to book profit on account of profit made on sale of land not credited to profit and loss account.Analysis:The appeal and cross-objection were directed against the order of the ld. CIT(A) for the A.Y. 2004-05. The Revenue's grievance was the deletion of the addition to book profit due to profit on the sale of land not credited to the profit and loss account. The assessee had earned capital gain on the land sale, exempt from capital gain tax under section 45. As the proceeds were not available for dividend distribution, they were directly moved to the capital reserve account, not the P&L account. The AO added this sum to the book profit under section 115JB of the Income Tax Act, 1961. However, the ld. CIT(A) deleted the addition citing the limited power of the AO to examine and make adjustments to the book profit, as established by the Hon'ble Supreme Court in the case of Apollo Tyres Ltd. The Supreme Court's decision emphasized that the AO's role is to verify if the books of account are properly maintained under the Companies Act and to make adjustments as per the Explanation to section 115J. The judgment reiterated that the AO cannot go behind the net profits in the P&L account except as provided in the Explanation.The Hon'ble Supreme Court's ruling in the Apollo Tyres Ltd. case was crucial in this matter, as it clarified the scope of the AO's authority in computing book profits. The judgment highlighted that the AO's jurisdiction is limited to certifying the maintenance of accounts under the Companies Act and making adjustments as per the statutory provisions. The decision in the Akshay Textiles Trading case further supported this stance, emphasizing that capital gains should not be included in the profits liable to be taxed under section 115JA. Additionally, the Adbhut Trading Co. Pvt. Ltd. case underscored that once accounts, including the profit and loss account, are certified under the Companies Act, the AO cannot challenge their compliance with the Act's provisions.In conclusion, the Tribunal upheld the ld. CIT(A)'s decision to delete the addition under Section 115JB, following the precedents set by the Hon'ble Bombay High Court and the Supreme Court. The appeal and cross-objection were dismissed, with the delay in filing the cross-objection not being pressed during the hearing. The order was pronounced on 8th September 2014.
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